Treasury Secretary Jack Lew delivered a speech this morning at Pew about financial regulation, largely dedicated to making the case that the Obama administration's moves have been tough and have meaningfully increased the safety of the financial system.
But the most interesting section of the piece was less about regulations than about Lew's core subject area of budgeting. Or, rather, about their intersection. It doesn't matter what laws we put on the books against Wall Street malfeasance unless there's money in the budget to pay the cops who enforce the law:
An essential part of meeting that test will be to make sure regulators have the resources necessary to police markets and financial institutions effectively. Even with the best rules, illegal behavior or excessive risk taking will go unchecked unless regulators have the resources to conduct regular examinations, monitor suspect behavior, and go after those who break the law. The point is, this is not an either/or proposition. The best rules will fall short without effective supervision and enforcement. And effective supervision and enforcement are only possible with sufficient resources.
After failing in efforts to block or rollback reforms, some in Congress would now simply starve the regulatory agencies of funding so they lack the resources to do their job. Failing to fund supervision and enforcement of the new rules amounts to virtual deregulation. And it puts Americans at risk that financial threats will go unchecked.
I would add that this is one of these cases where money isn't just money. The American military is effective in part because Congress dedicates a lot of money to it. But I think it would be better to say that Congress dedicates a lot of money to the American military in large part because Congress wants the military to be effective and that "the military should be effective" is a notion that has widespread support throughout the American political system.
The question for medium-term financial regulation is whether politicians in Washington want the institutions charged with policing Wall Street to do a good job. Republican refusal to pony up the money is just one small sign that basically they don't.